The Telegraph
Friday , March 14 , 2014
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MCX-SX faces fresh turmoil

New Delhi, March 13 (PTI): Embattled MCX Stock Exchange may be rattled tomorrow by the resignations of its chairman G.K. Pillai and other public interest directors after the Central Bureau of Investigation (CBI) launched a probe into the grant of a licence to the bourse over five years ago.

The directors on the board of the exchange are likely to hold an emergency meeting tomorrow where Pillai and vice-chairman Thomas Mathew T may resign. Sources said two other public interest directors — Ashima Goel and D.R. Dogra — might also step down.

There are apprehensions that the licence of the bourse, which is already battling low business volumes because of the problems that have engulfed NSEL, can be cancelled if the CBI unearths something detrimental, sources added.

Pillai and these three persons were appointed as public interest directors on MCX-SX after Sebi asked the exchange last year to recast its board and governing structure in the wake of a payment crisis at NSEL, which had been promoted by the founders of MCX-SX — Jignesh Shah-led FTIL and the MCX group.

Sources said the board members of the exchange were of the view that the CBI enquiry would jeopardise the prospects of MCX-SX and make it difficult to engage any strategic investor.

Sebi has already issued showcause notices to the original promoters of MCX-SX after another regulator, the Forward Markets Commission (FMC), ruled they were not “fit and proper” to run any exchange in the wake of the NSEL crisis.

Sources close to the MCX-SX board members said they had tried their best to revive the exchange in the last four to five months but it would be hard to get to grips with all aspects of the snowballing crisis.

The CBI today registered a preliminary enquiry against former Sebi chairman C.B. Bhave and former wholetime member K.M. Abraham, Jignesh Shah-founded FTIL and MCX, among others.

The enquiry was registered to investigate the alleged irregularities stemming from Sebi’s grant of approvals to MCX-SX in 2008 and the renewal of its recognition in 2009 and 2010.

The CBI will attempt to ascertain how MCX-SX was granted permission despite opposition by the market regulator.

Bhave and Abraham have been known to be opposed to the grant of the licence.

MCX-SX began working as a full-fledged stock exchange last year after a prolonged battle with Sebi. The exchange was initially granted permission for only a limited segment of currency derivatives in 2008 on the condition its licence would require approval every year.

The enquiry was registered on a day the CBI carried out raids at various premises of NSEL.

Bhave became Sebi chairman in February 2008 and his three-year term ended in February 2011. Abraham’s term as a whole-time Sebi member also ended in 2011.